Renewal of Trending Stocks
In conjunction with paying attention to the sell signals described earlier, a very important aspect of managing a portfolio in self-directed accounts is performing market scans, which allows us to have watch-lists of trending stocks and ETFs to insert into our portfolios as we rotate out of our ageing trends. A market scan is really nothing more than flipping through charts on one of the free stock-charting services and saving those that are positively trending or those that are breaking out of a flat transition area, as I have previously described. My preferred charting software is freestockcharts, although stockcharts and tradingview are also popular. Additionally, most online brokers offer adequate charting services that allow investors to create their own watch-lists.
I want to emphasize that it is the creating and culling of a watch-list that is the basis for the Natural Selection component of this trend following system. Many investors will create an initial watch-list but not bother to update it on an ongoing basis. Without periodic watch-list renewal, some of the best trending stocks are overlooked and less optimal stocks will find their way into the portfolio, potentially hindering performance. This does not have to be a time-consuming process and for the purpose of longer-term investment strategies it can be done every month or two. An ETF watch-list is especially easy to maintain because there are far fewer of these instruments in the marketplace, so glancing at their charts can be done in 15 minutes or less. Because I am also an active trader (trading on the daily time-frame), I do manual scans of the indexes at least once per week and maintain watch-lists for stocks and ETFs on both the daily and weekly time-frames. This not only keeps my watch-lists fresh but it allows me to maintain a good sense of where various sectors and broader markets are headed. With this in mind, let's take a quick look at the portfolios. NEXT
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